1. Field of the Invention
The method and apparatus of the present invention relate to buying and selling products using electronic networks such as the Internet. In particular, the present invention relates to a novel purchasing model using the Internet.
2. Description of the Related Art
The standard system of selling and buying requires sellers to sell goods or services based upon projected demand. However, buying on projected demand can be risky and costly to sellers if their projected demand differs from true demand. If sellers overspend on their inventory, the burden of excess supply and price fluctuations can be a huge problem for the seller. These are real world problems that are compounded if the inventory is purchased with credit. On the other hand, if sellers under-spend on inventory, profits on potential sales and ability to get discounts based on larger volume of purchases will be lost.
Similarly, the buyers have limited purchasing powers in the current traditional model of commerce. Buyers are often limited to only purchasing what goods and services that are offered to them by sellers. Moreover, buyers have limited voice in getting better prices from sellers. Since individuals have low purchase volume, they often must pay higher price per good or service set by the sellers. There are always transaction costs when dealing with sellers that are passed on directly to the buyers. Retail outlets such as CostcoSM have allowed consumers to get better pricing per unit by offering larger quantities of the item, but buyers are often forced to buy in large quantities.
The use of the Internet has helped buyers get better pricing due to the increase in competition. Certain auction sites such as eBaySM, has helped fuel a new market of buyers and sellers, where buyers can participate more in the price setting. However, inventory issues and overall buyer empowerment can still be improved since eBaySM is based on buyers competing against one another to raise the price on a limited number of items available for sale.
An example where the present invention can be applied is in the buying and selling of popular arts. Popular works of art such as music, books, software, etc. have been distributed primarily through traditional “brick and mortar” retail outlets. Over the past few years, a variety of retailers have set up websites allowing the purchase of such popular works of art via the Internet, and have given consumers confidence in purchasing products on-line. However, the Internet has yet to provide a better means for the artists to take advantage of the Internet revolution. In fact, although transaction costs have decreased for retailers selling over the Internet, the artists have not benefited. The reason being is that artists still rely on traditional recording labels, publishers, or other establishments to produce their works of art and sell it to their consumers. For example, in the music industry, even in the Internet era, the record labels still organize the promotion and marketing from the top down using traditional methods that are costly and increasingly ineffective. These costs are passed on to artists, (who subsidize, through their own record royalties, a costly, labor-intensive, and non-interactive marketing and promotion infrastructure) and consumers (who pay higher prices without receiving any increase in perceived value). There is a growing dissatisfaction in the artist community with this business model.
Recently, some artists have tried directly producing and selling their products to the consumer by means of the Internet. For example, the artist formerly known as Prince sold his album without the use a recording label by directly selling his album off of his website. However, other artists have been slow to follow his lead. Most artists do not desire to take all the risk without any guarantee of receiving any money. Moreover, most artists lack the sophistication to market and successfully sell their products using the Internet. Given the hurdles of trying to sell their own album off the Internet versus the security of traditional recording contracts, artists have not been able to tap into the Internet revolution. The present invention hopes to overcome the current deficiencies in the prior means of doing business. The present invention based on a new community purchasing model hopes to be able to provide artists an alternative method of distributing music and creating revenue which, thus far, has not existed. This new method of distribution can be more profitable for artist, and more tailored made for the consumers, resulting in an economic model that may change the way popular works of art are produced and sold.